The tussle between power producers and Coal India over fuel supply agreements is far from over.
For the second time in four months, the Union Minister for Power, Mr Sushilkumar Shinde, has urged the Prime Minister's Office to direct Coal India to sign the agreements “within a month, based on the model fuel supply agreement (FSA) signed in 2009.”
In a recent communication to Mr Pulok Chatterjee, Principal Secretary to the Prime Minister, Mr Shinde accused Coal India of diluting the disincentive clause to 0.01 per cent, which will have no impact even if supply targets are unmet.
Coal India also has the liberty to discontinue supplies at any time, he said.
Not mandatory
Even after diktats from the highest-level and multiple interventions by nodal ministries, the supply pacts have not seen much progress.
Industry watchers say that the Coal Ministry's recent directive to Coal India to supply the fuel based on the MoUs would, in fact, further delay the signing of the fuel supply agreements as the companies would prefer getting coal based on MoUs.
“In the 2009 agreements, the penalty (for non supply by the coal major) was as high as 40 per cent. But Coal India has never paid any penalty. Power producers should focus on buying fuel instead of accusing the company,” said a top Coal Ministry official. Till 2007, the agreements were not mandatory.
“Supplies in the past were never an issue because contracts were signed based on available quantities. After 2009, the trigger level was 90 per cent and Coal India supplied at 90-93 per cent, gaining an incentive for 2-3 per cent of additional supplies,” said a senior official at Coal India.
Higher penalty
Mr Ashok Khurana, Director-General of Associated Power Producers, who is representing private power producers, said: “You already have an agreement for 306 million tonnes. Why re-invent norms? The only change is in trigger level.”
The NTPC Director (Finance), Mr A. K. Singhal, told investors at a conference call on Friday that the company wants a higher penalty clause.
“Have you seen the fuel supply agreement we signed for 125 million tonnes with Coal India? There are both incentives and penalty clauses. If there is drop in supply, they will pay penalty,” Mr Singhal said, when an analyst asked him why NTPC is pushing for penalty when Coal India has never paid penalty in the past.